Nowadays, the idea of the state is once again topical, even if its role is rejected in many politico-economic speeches. Indeed, among the globalization suggestions is the idea of global economic governance, indicating that the regulation is no longer reducible to exclusive and autonomous regulation of states. In such a case, would global governance be that system which would make it possible to achieve the objectives so much desired of sustainable development? This question encourages analysis of the elements of the debate over the problems of development. In this debate, while some see in global governance the best response to the multiplication of conflicting objectives, others see in it a legitimacy of an institutional framework whose true purposes do not actually concretize sustainable development requirements. They rely on theoretical and practical arguments to reject liberal policies preached by the international institutions. According to them, global governance privileges the interests of powerful economies, the United States especially, and enshrines the supremacy of multinationals and financial markets.

Thus, the term global governance has gradually become essential in the international debate through a crucial question: How to govern globalization without a global government? In other words, is it possible and effective to exert, through a set of regulations, some functions which, within states, usually concern the national government?

Today the global governance system is in a crisis of legitimacy; its purposes, its actions and the roles of its main players, are all disputed. Our objective is to show that several failures inherent in this system are moving us away from the prospect of sustainable development. We devote the first part to a discussion of global governance logics and the second to studying the problems surrounding the present legitimacy crisis. In the third part we stress the fact that crisis in itself plays no useful part in reaching the objective of truly sustainable development and in satisfying the requirements of a more realistic consideration of a revival of voluntarist economic policies.

Today, the recurring idea of a global governance system reinforces this tendency. Until the 1990s, the dominating paradigm remained that of interdependence. Since then, the world configuration has changed, creating the “need” for such a system. Why, therefore, such a need? Which theories justify it? And how are governance and economic policies combined?

This recognition of the mitigated assessment of structural adjustment programs and the Washington Consensus (Yacoub, 2009), has widened the field of intervention of international financial institutions. The failure of the first reforms having been explained by “bad” governance, the new conditionality is marked out by institutional reforms, incorporating good decision making processes and a choice of good policies. Thus, the concept of governance is omnipresent in speeches on development and for many reasons it must extend on a worldwide scale: the topic of globalization and the consecutive state denials suggest, according to a functionalist logic, the transfer on to a worldwide scale of regulatory instruments which have lost their effectiveness on a national scale. Otherwise, it is a new model of representation and of interdependence management which must be applied to more fields, in response to the whole globalization constraints: this globalization which is often perceived as a process of homogenisation, but which is rather a factor emphasizing differences on every scale.

Global governance must be the real place of power in response to claims of reforms by developing countries and the civil society. The aspiration for a more balanced and a more equitable globalization seems to have begun with the creation of WTO and its dispute settlement body. This symbolized the assertion of an arbitration power putting into context that of even the most powerful states. However, the question of power does not disappear (as shown by the failure of the WTO ministerial conference in Seattle), but remains confined within the limits of the spheres of influence on values, standards and institutions or on what Nye (2002) calls the soft power.

The appearance of conflicts between standards of symbolic reach (industry/environment, trade/ social rights, trade/public health…), raises the requirement for arbitration between global objectives legitimized by a global governance system, where each field of interdependence is entrusted to a specialized international institution. Economists took a long time to recognize the question of the environment and the renewal of natural resources. (Boutillier, 2003) The emergence of elements of planetary civic conscience with regard to the environment joins the range of new concerns which are dependent on global governance. For a while it seemed paradoxical that problems of environment pollution appeared on a global scale, whilst the corresponding regulations remained national. As specified by Jacquet and al. (2002), the questions relating to the environment raised in the 1990s had been symbolic of a new approach related to the world public goods concept. Hence the primacy of the sustainable development topic and its link with global governance. As underlined by Uzunidis (2008), sustainable development relies on the three social organization pillars seen via the environmental prism: the pillar “economy”, the pillar “society” and the pillar “environment” itself, or according to the expression popularized by Shell, in balance between the three P: Profit, People, Planet.

These requirements legitimized global governance as a means of coordinating national policies. Thus, it is today difficult to dissociate the terms “globalization” and “governance”, or this latter from the term “development”; it has become rare to find a text emanating from the main managerial organisms of the world economy where the term “governance” does not appear. Governance became a fashionable topic, dealt with by theorists, managers, political scientists, sociologists… to tackle questions of enterprise governance, local governance… and global governance. Indeed, there is not only a single model of governance; the theoretical bases of the concept can be enumerated at all the different levels of government.

The stakeholder theory is anchored in the neo-institutional economy. Several concepts were then borrowed from it, like the “node of contracts”, agency theory and the theory of transaction costs. The neo-institutional economy refers to the transactions economy, analyzing the governance structures starting from the concept of transaction cost [1]. On this basis a theory of the choices of governance structures has been developed. North completed this theory contribution by adopting a more dynamic approach and by insisting on the resolution of coordination problems. The neo-institutionalist view seeks to “endogenize” institutions, arguing their microeconomic base and their role in resources allowance. Recently, it is the more “Northian” branch of the neo-institutionalist theory which has been mobilized as regards institutional “design” elaborated by the World Bank. Transposed at the level of the state, the theoretical governance bases justify institutional reforms alleviating the failure of liberal reforms and joining again with a national political base favourable to development. The World Bank popularizes these new reforms under the qualifier of “good governance” [2].

Transposed on to a worldwide scale, the transaction costs approach provides a theoretical basis for global governance according to a transactional logic in a context of strong historical indecision weighting on the new states’ role and the sense of the political. (Laïdi, 2002) If we speak about governance, it is because the state no longer has sufficient instruments to declare a political position representing the national collective interest. Otherwise, by applying the theory of cost transactions to politics, it seems that many functions formerly assumed by public organizations must be given up to civil society or to the market. This is the logic that explains the weakening of the state decision-making powers and the contraction of the activity field of national policies in favour of the extension of prerogatives of global governance players like WTO, IMF, or institutions of the European Union; at the same time many of the great multinationals have metamorphosed into relentless political players. (Uzunidis & Yacoub, 2009)

Indeed, the ideological legitimacy of the market has greatly increased as its main players have drifted away from the confines of the national framework and so global governance takes over, confirming this new paradigm of power which passes less by a static hierarchy and more by networks of variable players. The state sees itself in a contractual relationship with many such players to guarantee the legitimacy of its actions. Therefore, as specified by Bianco and Severino (2001), it is the ambivalence of the role of the state and of its policies which are affirmed by the emergence of a global governance system. Like Laïdi (2001, 2002), we consider that this system indicates processes by which societies negotiate methods and logic which reconcile conflict and cooperation to form planetary social arrangements. But in this logic, an increasing share of the state’s decisional autonomy on a national scale is being withdrawn, to the extent that at the final stage of this process, an expression of Wolfgang Reinicke (1998) seems very significant: governing without government.

Without its traditional breadth of action, the state struggles to reform itself in order to impose its will towards global governance. For example, the GATS to which Member States of WTO adhere, is one of the treaties resulting from the Uruguay Round (1994). It foresees the liberalization of services in all sectors except for those related to sovereignty (justice, defence etc.). Otherwise, health, teaching, transports etc. are all integrated into the decisions of WTO and must be subjected to the market laws. The policy of privatization in services answers this logic of the dismantling of the social state. This gives rise to conjecture whether, in the near future, the public character of education might be considered as a form of dumping compared with non-subsidized private structures of teaching.

Referring to the main theory, the idea of global governance does not exclude the state from playing an active role. But in practice, the persistent mistrust in the state ensures that the very foundation of global governance is disputed by those who defend the stato-national political framework in the name of national sovereignty. Is the national interest becoming ambiguous, and does the rigour of voluntarist economic policies yield place to a higher organisational form? But in any case, surely it has become difficult to deny that the arguments justifying the organizational form of the nation-state are in a crisis of legitimacy?

Thus, if the IMF had the role of ensuring the stability of the world financial system and the World Bank the role of financing development, these institutions would play today the fireman and policemen roles: they condition the aids to liberal reforms and their insertion into the world economy according to the classical theory. But history shows that some initiatives may impoverish rather than enrich, and the structuralist approach rejects this insertion mode as sufficient means to start a constant accumulation process and act as a factor of development. The proof for this is the situation of developing countries suffering from deterioration in the terms of trade and involving deepening debt to pay for the import of essential products.

According to the World Bank itself, a limited number of countries benefited from 80% of its loans and the failure rate in poor countries ranges around 70%. According to UNCTAD, 90% of FDI loans to developing countries are intended for a few emergent economies, against 1% towards the least developed countries. Dependent on unsteady private capital and compelled to accept loans carrying liberal reform conditions, these countries suffer from another failure of global governance: the continuing fall in government aid to development; this is far from 0.7% of the rich countries’ GDP, as committed at the Rio Summit. One of the paradoxes of globalization is that it is an enrichment opportunity marked by a strong distributive asymmetry: the income variations between countries are accentuated and within countries social inequalities increase. Global governance is unable to manage this process effectively: the objective of sustainable development remains distant.

The attenuation of poverty seems a top priority but one which shares the spotlight with concerns before the reality of growing inequalities, considered as a threat to political stability and a handicap to competitiveness. In speeches on development, there is always a long list of recommendations pointing out the necessary reduction of the state’s discretionary role, institution of good governance, commercial liberalization, impartial legal system, etc. (Naïm, 2000). However one can legitimately ask, would not a country filling all these strict criteria already be a developed country? It would thus be necessary to learn lessons from previous development strategies to recommend programs which would include realistic objectives. These objectives must be defined taking into account each country’s specificities and compared only with other situations which are genuinely similar. But on this point also the legitimacy of global governance is disputed.

According to Galbraith (1997) the IMF must be more determined in its “hygienic action” with regard to “bankers and inefficient businessmen” and more benevolent regarding “suffering people”. International dialogue is essential, because it is the only kind which legitimizes a governance system. Then it is necessary to accept the progressive and differentiated opening up of developing countries. Perversely, though, the WTO prevents them from protecting their industries [4] and compels them to implement strict legislation as regards protection of intellectual property, making it difficult to absorb and develop new technologies. Thus, according to UNCTAD, the international trade system is unfavourable to developing countries, especially the least advanced ones, and their situation is worsened by the hardening of standards on the developed countries’ markets.

The global governance thesis thus reveals another gap: “the Occident, essential place of the theoretical debate, finds good reasons to elaborate interventionist doctrines based on great principles or good feelings”. (Martres, 2003, p. 19) Paradoxically, and always for these same “good reasons”, they are liberal policies which are recommended to the developing countries. For example, the American government preaches free trade, but its policies on agriculture or steel, and towards other sensitive sectors, do not respect the free enterprise principles. Each year, under normal economic conditions, the American economy receives subsidies of an amount of 10.7 billion dollars, but devotes only 3.1 billion dollars to public aid for development.

Countries which did not follow the IMF program to the letter (South Korea, Taiwan…) or at all (China, India) obtained better macroeconomic results than others (Argentina, Philippines…). They applied anti-cyclical policies, even during financial crises. (Easterly, 2001) East Asian countries continued during crisis to be based on high added value industries. But many others, among them African and Latin-American economies are undergoing a “premature de-industrialization”. (Richard, Rayment, 2004)

The official thought on bonds between development and international relationships does not allow a new organization of the world economy. Bilateralism is back in the handling of economic problems. Whereas the IMF has revised its positions concerning financial liberalization, the American government negotiates bilaterally with certain countries (Chile, Singapore…) so that they liberalize capital entries (Uzunidis, Yacoub, 2009). This “competitive liberalization” policy (Barry, 2004), responds to a reversal of WTO policies toward the uncontrolled liberalization of goods and capital flows. But, for the United States, this neo-mercantilist policy is vital to preserve their power. By adopting the approach of my way or the highway, the American government hinders the necessary reform of international institutions.

Where is then the balance of power in this global governance system where the negotiation structures are inequitable and disputed? According to Jacquet and al. (2002), the decisions derive normally from the mandate entrusted by states to multilateral institutions, but the absence of procedures ensuring their democratic responsibility poses the problem of their legitimacy: Can these institutions be presented as simple execution organizations without their own political responsibility? Or must they (and if so, how?) assume a political identity toward states and non-governmental organizations?

Around these questions, debates become animated on the functioning of the current global governance. Its most outstanding characteristic is that multilateral institutions are no longer perceived as inter-state institutions, but as representatives of the most powerful states, especially the United States. (Giraud, 2003) With the increasing negotiating power of multinationals and non-governmental organizations, states are marginalized. The definition of the New Order is significant here: it is a government of the organizations, by the organizations and for the organizations. (Andersen & Burns, 1996) Given that a good example is usually much better than a long speech, let us point out the initiative of Kofi Annan, who launched out into ambitious partnerships with the private sector, leading to a Global Compact [5]. We see in that the end of hope in important legal projections supporting development and preserving the same legitimacy of states in the expression of collective wellbeing. In any case, the code of conduct of multinationals was stillborn, because neither the international political context nor the main Northern countries and their multinationals encouraged it, nor do they want it any more.

It is known that states have “sub-contracted” an increasing proportion of their prerogatives to the private sector and that public decision centers are open to attack by lobbies. But, it is now a question of reintroducing the expression of private interests into a global governance model, by ratifying economic realities instituted during thirty years of liberalism. (Rogalski, 2001) The political percepts of globalization are the fruit of this model which seems to make the borders between the public and the private, the national and the international, and often the licit and the illicit, disappear and which supports, with enormous risks, the hegemony of the multinationals firms and financial markets.

Thus, can the “machine to manufacture wealth” (capitalism) obey challenges that exceed it, or must we keep supporting the principle that it satisfies, in a very contestable way, our natural environment and our social relations? (Uzunidis, 2008) Because the weak assessment as regards environmental issues is not the only serious failure of global governance; the matter of developing international inequalities is also alarming. Multilateral institutions have not fulfilled their “promises” on development opportunities following liberalization, nor their engagements to reduce social inequalities. A new language and new directions took shape such as fighting poverty and safeguarding the environment. (World Bank, 2000) But we remain sceptical towards this new rhetoric, since the practices stay the same and the original policies remain considered as the panacea for bad development.

The powerful economies continue to impose international rules ensuring the flow of over-saving, while ignoring the solvency of developing countries, the majority of which are involved in the spiral of debt and then of consequent adjustment. (Uzunidis & Yacoub, 2009) The public policies of liberalization and rationalization of markets have also supported the large companies allowing them to apply world strategies. (Uzunidis, 2002) Furthermore, a world strategy of profit maximization can only expand at the expense of developing countries’ interests and environmental requirements. This is a failure of global governance, with the effect that the Ricardian comparative advantages, applied to the environmental question, authorize investor countries to buy “rights to pollute” next to the poor countries and justify the delocalization of polluting activities in these countries. This maintains the problem on the global level (Uzunidis, 2008). A true global governance system would provide a framework outlining the way in which “economic liberalism” could become a reality, profiting from the neo-mercantilism of the most powerful economies. (Uzunidis, 2005, 2006)

When some players in the global governance field claim to want to solve both “bad development” problems and the prevailing social inequalities and also to support the capitalist market economy, it is the second action plan which carries it. This reflects a theological belief in capitalism and the superiority of free trade in promoting development. However, these assertions are contradicted by reality. Liberal policies and capitalistic hypertrophy weaken the state’s capacity to act in the national interest; hence, an important private but unequally distributed wealth creation and few public goods. This dissociation between the private and the national interests, between the economic and the social, deliberately reduces the field in which national policies are defined. Global governance legitimizes this new paradigm of power running less through national states and more through the world market, where many players seek financial profits, encouraged by financial liberalization. This latter was supposed to make developing countries benefit from the multiple advantages of FDI. However, investments are very polarized and in mainly speculative. The “financialization” of the world economy has created a dichotomy between real and financial spheres. And we do not take risks in estimating that international institutions contributed to generating this dichotomy. Today, many economists note that the sequence of reforms is important and that countries must first reinforce public control methods. But financial liberalization has already exacerbated the dangers. Paradoxically, international institutions have been able neither to predict nor to explain them.

Indeed, crises became recurrent and more serious (Asia, Mexico, Argentina, Russia, United States…). These are violent and expensive crises, worsening inequalities, to the extent of being able to evoke a “globalization” of poverty. They are occasions renewing reflections on the effectiveness of global governance, as being able to stabilize the economy. According to Stiglitz (2002), when a country was in crisis, the IMF interventions did not succeed in stabilizing its situation and often, they degraded it. The IMF failed in its initial mission (promoting world stability) and was no more effective in guiding the transition of the ex-Communist countries.

The consequences of systematic deregulation are thus revealing the brittleness of global governance. Like Stiglitz (2008), we think that neo-liberal fundamentalism of the market is a political doctrine which served certain interests, but was never supported by any economic theory. Financial globalization requires a maturity of financial systems, but public regulation remains imperative. The gaps in global governance are articulated around this supremacy of the private sector in the development model, reducing the state’s role to simple kingly functions. The recent crisis in the United States shows the enormous risks.

The signs of this crisis appeared with the crisis in mortgage real-estate loans. Despite intervention by European and American central banks, it was transformed into a banking and monetary crisis, then into a stock market crisis spreading to the rest of the world. It is an Anglo-Saxon maxim too big to fail, which brought central banks and states supporting banks into difficulties; from injections of cash, we passed to the nationalization of banking losses. The American government gave the example with the Paulson plan, and then the European states followed it by putting into practice many national actions, so far as permitted by the rules of European Commission and the Maastricht criteria. But these “rescue plans” were not sufficient to moderate the effects on the real economy. In the United States especially (but also in Europe and in other countries of the world), it was the employees who were the most affected: hundreds of thousands lost their homes, others their employment, and the falls in large firms’ investments and profits were colossal. Which investor can be unaware that the world economy rests on a mountain of debts, those of the American households and those of the federal economy?

The effects on the economy and society will be important and durable. Imbalances have deepened, with the obvious dichotomy between real and financial spheres and with the United States practice of inflating their debts. We can blame the crisis on capitalism drifts. But these drifts were inevitable with little or uncontrolled financial markets. They were even encouraged by the financial globalization cycle, open markets and privatizations, weakening the regulating role of the state, in favour of the private shareholder and at the expense of sustainable development requirements. The “whole market” importance seems called into question, with a plethora of criticisms of these “drifts”. But is it about a questioning of the capitalist logic itself? Because, without advised public control, this logic of capitalist supremacy places the economy at the mercy of a systemic crisis; its major and most durable repercussions will still affect the sphere of reality; all countries, especially the least developed ones and all social groups, especially wage-earners and the poorest, are suffering.

The world-wide crisis of capitalism is already taking systemic forms by cumulating financial, monetary and also social, food and environmental dimensions (Cassen & Ventura, 2008). It has created strong contradictions in the system and its “elites”: calling into question the United States hegemony, nationalizations by governments as liberal as those of London and Washington, the decline of international financial institutions, a tendency towards a new multi-polar world balance of forces… Therefore, we can affirm that to counter the global risks of globalization, we could not associate effective global governance. The sustainable development objective, founded on the three Ps, remains utopian. It is not only the economic vision which was placed above all, but also a particular vision of the economy; the fanaticism of the market. The rules of the world economic game are fixed around structures concretizing a strong asymmetry of decision-making powers. They are instruments serving the interests of industrialized countries, especially the United States, and those of some private participants.

Consequently, it is reasonable to think that “the great evening of global governance is not for tomorrow”. (Laïdi, 2001) However this should not discourage us from thinking of the means which might lead to that end. In the short run, the most realistic step is not returning to the state its traditional means of action, but recognizing that it was a fundamental error to preach the neutrality of its policies in the development process, when its role seemed more than ever crucial and decisive. (Rodrik, 2004; Yacoub, 2008) The new stakes of globalization encourage us to learn lessons and to grasp all the “cruciality” of a new development model. In front of the global governance crisis and the liberal approach which underlies it, dose not the concretization of this model require a true revival of active economic policies?

Therefore the question of development has been restrained, to the benefit of a market fanaticism. However, facts have shown that the corresponding risks are quite real, since crises are recurrent and increasingly serious. The current crisis is a good example. Instead of revolutionizing the economic thought and relationships, to draw a world economy respectful of the environment and turned towards sustainable development (Uzunidis, 2008), international institutions implicitly encouraged capitalism drifts, creating a dichotomy between real and financial spheres. That is why today, globalization is acting neither for world economic stability, nor for the majority of developing countries, nor for the poor or for the environment.

These are sufficiently alarming facts to necessitate voluntarist national policies focused on sustainable development requirements and aiming at making “advantageous” a globalization likely to be from being perfect. (Yacoub, 2009) Approaches and pronouncements which persist in denying vitally needed economic policies hide another reality; that of actions without speech, or in total contrast with it. This proves that there should no longer exist in contemporary economies a dichotomous choice between a minimum of state and too much state. Considering the inefficiency of the current global governance, globalization requires a revival of the state role - as the indispensable condition of capitalism revival.